Chapter 05
MONEY AND CREDIT
The role of the financial system is to intermediate
between lenders and borrowers, providing a menu
of saving vehicles with differing risk and return
characteristics. Financial intermediaries help the
investors find the financing they need, taking into
account the returns and risks on the project they
wish to undertake. In carrying out their functions,
financial intermediaries reduce transaction costs
for savers and investors and help reduce problems
of asymmetric information that are inherent in the
relationships between investors and entrepreneurs.
For a given level of saving, more efficient
intermediation increases the productivity of
investment. It seems obvious that the more
efficient the financial system is, the stronger would
be the economic growth.
The global economy for some time has enjoyed
good economic growth and increasing depth in
financial markets, accompanied by the significant
financial innovation. This growth co-existed with a
combination of favorable economic indicators,
with relatively benign inflation levels, low risk
premia, and an easy access to finance even in the
midst of continuing global imbalances. Until
recently, the risk associated with such development
seemed to be contained; however gains from the
benign macroeconomic environment of the last few
years have been dealt with a severe blow in the
form of liquidity crunch triggered by the US subprime mortgage crisis. These events have brought
to the forefront some global economic and
financial vulnerabilities whose prolonged impact
could pose certain risks given that the world is
more integrated today than ever before.
Pakistan has made a significant progress in
improving the health and soundness of the banking
and financial sector over the last two decades.
During this period of transformation, the financial
sector of Pakistan has evolved into a more
progressive and dynamic module of the economy,
both in response to the financial sector reforms and
to the growing financing needs of an expanding
economy. In response to the growing demands of
financial globalization, Pakistan’s financial system
is starting to integrate with international financial
markets. Financial integration was particularly
expedited in FY07 in which record high foreign
portfolio investment was received in stock market
as well as through the issuance of GDRs.
Additionally, with the rising strength of the
corporate sector and vigorous expansion plans, the
central bank is in the process of initiating External
Commercial Borrowing (ECB), which at the
moment is approved on a transactional basis. This
liberalization measure will provide an opportunity
to the corporate sector to raise external loans for
project finance, bond floatation, structured finance
and Islamic products.
In Pakistan, the composition of financial sector
gives credence that the overall dependence on the
banking sector has increased in the last few years.
Given the scope and requirements of the private
sector, growth in the banking sector is essential.
Encouragingly, the outreach of the banking sector
continues to improve, with diversified pattern in
ownership, both foreign and local, and with the
expanding network of commercial banks,
microfinance institutions and Islamic banks in all
parts of the country. Alongside these
developments, ongoing financial sector reforms are
paving the way for a more diversified financial
sector, equipped to facilitate the economic growth
process. Financial sector assets have recorded a
remarkable growth in recent years. Strong growth
of mutual fund---being managed by professional
and reputable asset management firms—is largely
attributed to the improved performance of the
domestic financial markets, and points to the
gradual but steadfast process of diversification of
81
Pakistan Economic Survey 2007-08
the financial sector. These developments augur
well for financial stability as well as meeting the
goal of enhancing financial services penetration.
Monetary Policy Stance
The process of tightening of monetary policy
began in FY05 from a broadly accommodative one
to more aggressive. The moderate interest rates,
together with broad-based private sector credit
demand helped in raising industrial production.
This has resulted in acceleration in monetary
expansion. Therefore, heightened activity also fed
a gradual rise in core inflation. The government’s
mid December 2004 decision to lift the freeze on
domestic POL prices raised inflationary
expectations, forcing a more aggressive tightening
of monetary policy. It was in April 2005 that the
SBP raised its discount rate by 150 basis points
(bps) to 9 percent, and further to 9.5 percent in
July’06 with the same objective of controlling
inflation. Demand pressures were still high, as
reflected by high growth in credit to private sector,
rising imports resulting in the widening of the
current account deficit and an expansionary fiscal
policy envisaged in the Federal Budget 2006-07.In
FY07, inflation target of 6.5 percent was surpassed
by 1.3 percentage points, primarily because of
demand pressures as reflected by widening fiscal
and current account deficits and double-digit food
inflation. During FY08, the SBP continued with
tight monetary policy stance, thrice raising the
discount rate and increased the Cash Reserve
Requirement (CRR) and Statutory Liquidity
Requirement (SLR). During H1-FY08, the SBP
raised the policy rate by 50bps to 10 percent
effective from August 1st, 2007. Furthermore, the
SBP zero rated the CRR for all deposits of one
year and above maturity to encourage greater
resource mobilization of longer tenor and 7 percent
CRR for other demand and time liabilities. In H2FY08 the SBP further tightened Monetary Policy
by raising discount rate by 50bps to 10.5 percent.
Furthermore, the CRR was raised for deposits upto
one year maturity by 100bps to 8 percent while
leaving term deposits of over a year zero rated. The
objective was to give incentives to commercial
banks to mobilize long term deposits. In the light
of continued inflationary buildup and increasing
pressures in the foreign exchange market, the SBP
announced a package of monetary measures on
82
May 21, 2008 that includes;(i) an increase of 150
bps in discount rate to 12 percent; (ii) an increase
of 100 bps in CRR and SLR to 9 percent and 19
percent, respectively for banking institutions (iii)
introduction of a margin requirement for the
opening of letter of credit for imports (excluding
food and oil) of 35 percent, and (iv) establishment
of a floor of 5 percent on the rate of return on
profit and loss sharing and saving accounts.
Monetary and Credit Development
In order to improve the effectiveness of monetary
policy and avoid ambiguities in sending out policy
signals, the SBP has abolished the Annual Credit
Plan (ACP). This was a long awaited measure,
following the removal of credit ceilings which
made the Credit Plan redundant. Since broad
money (M2) was the only intermediate target in the
monetary policy framework, SBP continued to
prescribe targets of NFA, NDA, government
borrowings and private sector credit .It is expected
that the abolishment of ACP will help remove the
uncertainties emanating from multiple targets of
monetary aggregates.
A sharp jump in monetary aggregates during the
last month of FY07 pushed the aggregate M2
growth for the year to 19.3 percent. This strikingly
higher growth in M2 was caused entirely by a
phenomenal rise in NFA in FY07.For 2007-08,the
SBP had assumed that with real GDP growth target
of 7.2 percent and inflation target of 6.5 percent,
broad money(M2) supply growth should grow by
13.7 percent. The money supply growth during
July- May1 of the current fiscal year slowed to 9
percent compared to 14 percent during the
corresponding period of FY07 (Table-5.1). The FY
08 growth in M2 is entirely attributable to a rise in
net domestic assets (NDA) of the banking system
due to high government borrowings for budgetary
support, as the NFA registered a contraction during
the period, mainly reflecting the weaknesses in
country’s external balance of payment. The
monetary tightening has been successful in
moderating the exceptional rise in private sector
credit growth seen in recent years to levels
consistent with its long term trends. However, the
impact of this desirable moderation in private
1
Pertains to 10 May for FY08 and 12 May for FY07
Money and Credit
sector growth on M2 was more than offset by
continued strong budgetary borrowings of the
government from the banking system. The NDA of
the banking system registered an expansion of
Rs.656 billion during Jul-May FY08 compared
with an expansion of Rs.395 billion during the
corresponding period of last year.
(Rs. billion)
Jul-May*
2007-08
423.02
362.06
60.86
0.09
414.39
369.85
44.33
-0.03
0.24
-180.69
656.72
21.32%
-289.84
366.89
9.03%
Source:SBP
Table-5.1 Profile of Monetary Indicators
Jul-May*
2006-07
185.84
212.36
-26.42
-0.09
273.98
263.43
10.40
-0.23
0.38
-64.29
395.54
14.67%
84.59
480.12
14.09%
1.Net government sector Borrowing(a+b+c)
a .Borrowing for budgetary support
b.Commodity operations
c.Others
2.Credit to Non-government Sector (d+e+f+g)
d.Credit to Private Sector
e.Credit to Public Sector Enterprises (PSEs)
f. PSEs Special Account-Debt repayment with SBP
g.Other Financial Institutions(SBP credit to NBFIs)
3.Other Items(net)
4.Net Domestic assets (NDA)
Growth
5.Net Foreign Assets (NFA)
6.Monetary Assets(M2)
Growth
*pertains to 10th May for F08 and 12th May for FY07
Analysis of Monetary Indicators
Bank Credit to Government
The net bank credit to the government for
financing commodity operations and budgetary
support amounted to Rs. 423 billion during JulyMay FY08 against Rs.185 billion during the same
period last year.
Credit to government for
commodity operations expanded by Rs. 60 billion
during July-May FY08 as compared to contraction
of Rs.26 billion during the same period last year,
while credit to government for budgetary support
increased to Rs. 362 billion.
Table-5.2 Monetary Indicators(Growth Rates)
Indicators
Net Bank Credit to Government Sector
Bank Credit to Private Sector
Net Domestic Assets(NDA)
Net Foreign Assets (NFA)
Money Supply(M2)
*pertains to 10th May for F08 and 12th May for FY07
FY 05
FY 06
FY 07
13.9
34.36
22.15
9.22
19.12
11.63
23.47
16.05
11.52
15.07
11.14
17.3
14.23
38.65
19.32
In the current fiscal year, domestic and external
shocks of extra-ordinary proportions caused large
slippages on the fiscal side. The financing plan of
the fiscal deficit also affected by these shocks. The
overall fiscal deficit of Rs.398 billion was to be
financed by external sources(Rs.193 billion), and
domestic sources (Rs 131 billion).The remaining
Rs. 75 billion was to come from privatization
proceeds. Within domestic sources, Rs 81 billion
financing was to come from banking sources while
Jul-May*
2006-07
22.29
12.23
14.67
11.9
14.09
(Percent)
Jul-May*
2007-08
45.66
14.91
21.32
-29.43
9.03
Source: SBP
the remaining Rs 50 billion was to come from nonbanking sources. The domestic and external shocks
not only increased the size of the fiscal deficit but
they also changed the composition of financing.
The borrowing requirements increased from Rs.
324 billion (the net of privatization proceeds) to
Rs. 683.4 billion (with no privatization proceeds)an increase of 111 percent. External resource
inflows were adversely affected by these shocks
and against the budgeted level of Rs.193 billion,
83
Pakistan Economic Survey 2007-08
during the current fiscal year, which has almost
doubled the stock of MRTBs with SBP to Rs.945.9
billion. To put this in perspective, the July-May
FY08 borrowings are twice the net borrowings
seen during the preceding three years (Fig 5.1).
The reliance on central bank borrowing is partly an
outcome of scheduled banks’ reduced interest in
government papers .It may be pointed out that the
government had borrowed substantially from the
scheduled banks during Q1-FY08. This trend
however changed completely in subsequent
quarters when scheduled banks showed little
interest in the T-bill auctions. This probably
reflects strong seasonal demand for private sector
credit as well as attractive returns on such loans
and tight liquidity conditions in the inter-bank
market. In addition, the expectations regarding
changes in discount rate in the monetary policy
statement for H2-FY08 also limited the scheduled
banks’ participation in the auctions of the
government securities. (Fig 5.2)
only Rs.119.4 billion is likely to materialize.
Pakistan could not complete the transaction of
GDRs of the National bank of Pakistan and could
not launch sovereign and exchangeable bonds.
Furthermore; some of the lending from the
multilateral banks could not be materialized. These
developments had adversely impacted the external
resource inflows which remained below the
budgeted level. Thus, the brunt of adjustments on
the financing side fell on domestic sources.
Against the budgeted financing of Rs 131 billion
from domestic sources, it increased to Rs 564
billion. Within domestic sources, the bulk (82.2
percent) of financing came from banks while the
remaining Rs 100 billion or 17.8 percent came
from non-bank sources. Most importantly, the
borrowings from the State Bank of Pakistan
reached at an alarming level which is posing
serious complications for the conduct of monetary
policy. On cumulative basis, as on May 10, 2008
government has borrowed Rs.551 billion from SBP
Fig 5.1Government Budgetary Borrowings
Total borrowings
From Scheduled banks
400
Rs.billion
551
From SBP
600
212
200
99
98
0
178
35
191
161
102
362
170
22
-59
-189
-1
-200
-400
Q1 FY 08
Jul
84
Aug
Sep
Nov
Dec
Jan
Feb
Mar
2008
2007
Accepted
2008
2007
2008
2007
2008
2007
2008
Oct
Offered
2007
Target
2007
2008
2007
2008
2007
2008
2007
Rs. billion
Fig 5.2 T-bill Auctions Results
180
160
140
120
100
80
60
40
20
0
Jul-10May 08
2007
FY 07
2008
Jul-12May 07
2008
Jul-1Dec 07
Apr
Money and Credit
Due to phenomenal rise in government sector
borrowings from the banking system, net domestic
assets of the banking system registered a strong
growth (21.32 percent) during July-May FY08
compared to the growth (14.67 percent) recorded
during corresponding period of last year. The SBP
has contributed the most to the overall NDA
expansion mainly due to the strong growth in the
government borrowings from the Central Bank.
Credit to public sector enterprises which registered
an expansion of Rs.44 billion in contrast to Rs.10
billion during the corresponding period last year
also contributed to the current rise in NDA. This
growth in the credit to PSEs is attributable to
delays in settlement of oil price differential claims
of one public sector oil marketing company
(OMC), and the credit extension to the electricity
distribution companies.
Net Foreign Assets (NFA)
NFA of the banking system registered a net
contraction of Rs.289 billion during July-May
FY08 compared to an expansion of Rs.84billion
during the corresponding period last year. This
contraction in NFA is attributable to delays in
issuance of GDRs, sovereign bonds, receipts of
lower-than-expected logistics support, decline in
foreign investment, lower inflows from multilateral
development banks, and SBP’s decision to provide
foreign exchange to support a part of oil payments
even when the oil prices are at their historic high
levels.
Fig 5.3 Net Foreign Assets
100
34.4
17.3
12.8
FY 04
FY 05
-100
-71.4
-99.9
-150
-200
-250
-300
-289.8
Jul-Dec FY07
Jul-May FY07
Jul-Jun FY07
Jul-Dec FY08 Jul-May FY 08
Credit to Private Sector
Credit to private sector grew by 14.9 percent
during July-May FY08 as against 12.2 percent in
the same period of last year. Credit to private
sector as percent of GDP is continuously rising
since 2001-02 (Fig-5.5).
Fig 5.5 Credit to Private Sector/GDP(mp)
23.5
FY 03
-50
FY 06
FY 07
14.9
FY 08
Net credit to private sector stood at Rs.369 billion
during July-May FY08 compared with Rs. 263
billion in the same period last year. Private sector
credit was growing at a slower pace till January
2008 compared to previous year, gathered
momentum thereafter. The key factors contributing
31
29
27
25
23
21
19
17
15
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
Percent
34.3
92.8
0
Fig 5.4 Growth of Private sector
40
35
30
25
20
15
10
5
0
84.59
50
Rs.billion
Net Domestic Assets
to recent acceleration in private sector credit
growth include: (i) rise in working capital
requirements due to higher input costs; (ii)the need
for bridge financing to settle price differential
claims of the OMCs and IPPs; and (iii) the higher
fixed investment in the month of March 2008.
85
Pakistan Economic Survey 2007-08
Table-5.3 Private sector credit (Flows)
Sectors
Overall Credit (I to V)
I.Loans to Private Sector business
A.Agriculture
B.Mining And Quarrying
C.Manufacturing
Textiles
D.Electricity,gas and water
E.Construction
F.Commerce and Trade
G.Transport,storage and communications
H.Services
I.Other Private Business
II.Trust funds and NPOs
III.Personal
IV.Others
V.Investment in Securities and Shares
A look on advances to private sector (Table 5.3)
suggests that, while the increase in raw material
prices did cause acceleration in credit demand in a
few industries, the increase in interest rates had put
significant downward pressures on credit demand
especially in industries that are capable of
generating cash flows internally, sufficient to meet
working capital requirements. It must also be kept
in mind that the credit by the banking sector is also
being supplemented by other sources of financing.
The private sector is using non-bank finances, thus
shifting part of the credit demand away from the
banking sources. In particular, besides banks, nonbank financial institutions are meeting the
financing demand of the private sector through
their investment in debt instruments (TFCs and
Sukuk).It may be pertinent to note that most of the
private sector TFC’s and Sukuk’s have been used
to refinance bank credit. Availability of foreign
investment and loans has also played an important
role in softening the demand for bank credit
particularly in telecommunication sector. It appears
that demand for fixed investment loans has
moderated in a number of industries. However, this
does not necessarily suggests a slowdown in
economic activity as (a) the moderation in fixed
investment demand in cement, construction and
textile is more of a reflection of the fact that these
industries had already expanded their capacities in
recent years; and (b) some of the industries are
86
(Rs.billion)
Jul-Mar
FY07
267.5
203.2
10.5
0.3
119.0
21.6
12.3
10.3
15.9
13.9
18.4
2.9
0.6
38.8
4.1
20.8
FY08
368.0
304.7
12.1
4.7
193.1
94.2
37.3
15.0
28.5
4.0
10.0
-1.2
0.5
21.2
-0.6
42.2
Source:SBP
financing their expansion projects through other
sources, such as foreign currency loans (e.g.,
telecom), foreign investments (telecom, chemical)
and floatation of debt instruments (e.g., chemical,
cement, real estate and ship yard) in the domestic
market. Further, the demand for fixed investment
is expected to grow substantially in the power and
refinery sector.
The commencement of financing private sector
power projects will provide a boost to private
sector credit growth. It is also likely that
companies which met their demand from external
borrowings in earlier periods would revert to
domestic markets given the expected widening of
spread overseas.Although the SBP kept the
liquidity conditions tight in inter-bank market
throughout FY08, the impact on commercial
bank’s ability to lend was weaker by a number of
factors such as increase in bank’s paid up capital,
more than required capital adequacy of banks,
increase in non-performing loans, particularly in
consumer financing, SME, corporate and internal
cash generation through increased profitability, the
continued process of mergers and acquisitions, upgradation of the risk management systems in a few
banks and a slight deterioration in credit quality
have prevented a few banks from aggressive
lending.
Money and Credit
Sectoral Analysis:
Manufacturing, power, and commerce made major
contributions in the growth of net advances. In
contrast, contribution from services, construction,
personal and others was significantly lower during
Jul-Mar FY08 compared to the corresponding
period of FY07.
Agriculture Sector: The gross disbursement to
agri-sector grew by 24.8 percent to Rs 138.6
billion) during Jul-Mar FY08 compared with 21.9
percent in the same period of last year (Table5.4).Production loans rose by 28.5 percent to
Rs.125.4 billion from Rs.97.6 billion last year;
while the development loans declined to Rs.13.1
billion from Rs.13.6 billion during the same
period. Commercial banks gross disbursement
during Jul-Mar FY07grew to Rs.95.1 billion. An
encouraging factor regarding disbursement of
agricultural credit was the increasing role of
private domestic banks vis-à-vis traditional lender,
ZTBL. The share of private domestic banks in total
disbursement increased from 14.5 percent (Rs 16
billion) during Jul-Mar FY07 to 21.6 percent
(Rs.29.9 billion) during Jul-Mar FY08.On the
other hand, share of ZTBL declined from 36.8
percent(Rs.40.8 billion) during Jul-Mar FY07 to
28.5 percent (Rs.39.5 billion) during Jul-Mar
FY08.Among the major commercial banks,
National Bank of Pakistan continued its
dominance, followed by Habib Bank Limited,
MCB Bank, Allied Bank of Pakistan Limited, and
United Bank Limited.
Table-5.4 Targets and Actual Disbursement of Agriculture Loans
Actual Disbursement (July-March)
FY 07
FY 08
Name Of Banks
Pro
Dev
Pro
Dev
Total
Loans
Loans
Loans
Loans
I. Total Commercial Banks (A+B)
57.2
7.9
65
88.6
6.5
A.Major Commercial Banks
42.8
6.1
49
61.6
3.5
1.Allied Bank of Pakistan Limited
4.5
0.1
4.5
8.8
0.1
2.Habib Bank Limited
9.3
4
13.3
14.1
0.8
3.Muslim Commercial Bank Limited
5.2
0.1
5.4
13.4
0.5
4.National Bank of Pakistan
17.5
1.5
19
19.4
1.2
5.United Bank Limited
6.3
0.4
6.7
6
0.8
B Private Domestic Banks
14.3
1.7
16.1
27
3
II.Total Specialized Banks(1+2)
40.4
5.7
46.2
36.8
6.6
1.Zarai Taraqiati Bank Limited
36.9
4
40.9
33.6
6
2.P.P.C.B
3.6
1.7
5.3
3.3
0.7
Grand Total (I+II)
97.6
13.6
111
125.4
13.1
Power Sector: The demand for advances was
significantly higher in power sector during Jul-Mar
FY08. Indeed, the rise in working capital loans
incorporated the impact of delays in payment from
WAPDA to IPPs, whereas growth in fixed
investment loans reflects the impact of capacity
expansion in private sector power projects.
Manufacturing: Credit to manufacturing sector
rose to Rs.193 billion during Jul-Mar FY08
compared to Rs.119 billion in Jul-Mar FY07.This
higher growth was mainly driven by higher
advances to the textile sector (Rs.94.2 billion in the
FY08as compared to Rs.21.6 billion in the same
(Rs.billion)
Total
95.1
65.1
8.8
14.9
13.9
20.6
6.9
30
43.5
39.6
3.9
138.6
Source:SBP
period last year); excluding the textile industry, the
growth in advances to manufacturing sector has
decelerated.
Construction: Advances to construction sector
rose to Rs.15 billion during Jul-Mar FY08 Rs.10.3
billion in the corresponding period last year. The
issuance of privately placed Sukuks for financing
new projects probably explains lower demand for
fixed investment loans from this sector. Besides
rising housing demand, the increase in domestic
raw material prices for construction mainly
explains the higher demand for working capital
requirement in this sector during Jul-Mar FY08.
87
Pakistan Economic Survey 2007-08
Consumer Loans: Advances to consumer loans
slowed and reached to only Rs.16.6 billion during
Jul-Mar FY08 from Rs.35.2 billion in the
preceding year (Table 5.5). The decline in
consumer loans is evident in all categories (except
mortgage finance). In particular, deceleration in the
growth of auto finance was attributed to (1) lower
demand for automobiles due to increase in prices
of locally produced cars, and (2)risk aversions of
banks following recovery issues(e.g., one of the
banks has even suspended auto finance scheme).
Monetary Assets
The Components of monetary assets (M2) include:
Currency in Circulation, Demand Deposit, Time
Deposit, Other Deposits (Excluding IMF A/C,
counterpart) and Resident’s Foreign Currency
Deposits (RFCDs). The developments in these
components during the July-May FY08 of the
current fiscal year are presented below (Table-5.6)
Table 5.5 Consumer Financing
Consumer Financing
1.House Building
2.Transport i.e purchase of cars etc
3.Credit cards
4.Consumer Durables
5.Personal Loans
6.Others
Total
Table-5.6 Monetary Aggregates
Items
End June
2006
2007
740,390
840,181
(Rs.billion)
Change During
Jul-Mar
FY 07 FY 08
9
10.2
7.6
3.4
7
1.8
-0.4
0.7
11.9
0.4
-0.1
0.1
35.2
16.6
Source:SBP
(Rs million)
July-May*
2006-07
2007-08
874,171
1,026,284
A. Currency in Circulation
Deposit of which:
B. Other Deposits with SBP
4,931
7,012
6,113
4,341
C.Total Demand &Time Deposits incl.RFCDs
2,661,584
3,217,962
3,006,745
3,411,470
of which RFCDs
195,501
207,312
199,955
234,882
Monetary Assets Stock (M2) A+B+C
3,406,905
4,065,155
3,887,029
4,432,041
Memorandum Items
Currency/Money Ratio
21.7
20.7
22.5
23.2
Other Deposits/Money ratio
0.1
0.2
0.2
0.1
Total Deposits/Money ratio
78.1
79.2
77.4
77.0
RFCD/Money ratio
5.7
5.1
5.1
5.3
Income Velocity of Money
2.1
2
*pertains to 10th May for F08 and 12th May for FY07
Source:SBP
Note: Compilation of M1 based on weekly data has been discontinued. Now M1 is being compiled on the basis of
monthly returns and is given in Table 2.1 which would be published in the monthly Statistical Bulletin of SBP from
April 2008 in Table 2.1.
i. Excluding IMF A/c No 1 & 2 SAF Loans A/c, deposits money banks, counterpart funds, deposits of foreign
central bans, foreign governments.
ii. Excluding inter-bank deposits of federal and provincial governments and foreign constituents and international
organizations etc.
iii. Income Velocity of money is defined by the State Bank as GDP at current factor cost/quarterly average of
Monetary Assets (M2)
Currency in Circulation
As shown in the Table 6.6, currency in circulation
during July-May FY 08 increased to Rs.186 billion
from Rs.133 billion during the same period of last
year. The currency in circulation constituted 23.2
88
percent of the money supply (M2) as against 22.5
percent in the same period last year.
Deposits
During July-May FY08, demand and time deposits
has declined to Rs.165 billion as compared to
Money and Credit
Rs.340 billion in the same period of last year. On
the other hand, RFCDs has registered an increase
and reached to Rs. 27 billion as compared to Rs.4
billion in the same period last year.
The M2/GDP ratio, which is an indicator of
financial development continued to exhibit a rising
trend since 1990-00 from 36.9 percent to 46.6
percent in 2006-07.In March 2008, however, M2/
GDP ratio was 42 percent as compared to 43.4
percent in the corresponding period of last year
(see Table 5.7).
Table-5.7 Key Indicators of Pakistan's
Financial Development
Years
M2/GDP
DD+TD/M2
1999-00
36.9
74.6
2000-01
36.7
75.4
2001-02
40.0
75.4
2002-03
43.1
76.2
2003-04
44.9
76.8
2004-05
45.1
77.6
2005-06
45.0
72.5
2006-07
46.6
74.1
July-March
2006-07
43.4
72.3
2007-08
42.0
72.5
Source:SBP
Monetary Management
The Money market in Pakistan has developed
substantially since the process of liberalization of
the financial system began in the early 1990s.A
vibrant inter-bank money market not only helps to
transmit monetary policy signals but also provides
stability to financial institutions through meeting
short-term liquidity requirement with relative ease
and at competitive rates. The focus of SBP’s
monetary management in FY08 was to improve the
transmission of policy rates to the retail rates by
draining the excess liquidity from the money
market and keeping the overnight rates close to the
discount rate. The tight monetary stance adopted
since April 2005, did help in containing
inflationary
pressures
in
the
economy.
Nevertheless, high monetary growth towards the
end of FY07 and substantial increase in
government borrowing from SBP during current
fiscal year along with shortage in food supply,
started to dilute the impact of a tight monetary
policy stance. To contain the rising inflationary
pressures in the economy, SBP therefore continued
with a tight monetary stance during the current
fiscal year, as the risk of inflation was outweighing
the risk of economic growth. The SBP raised its
policy rate by 250 basis points in the monetary
policy statements and revised CRR for demand and
time liabilities and SLR in the upward direction.
Complement to the tight monetary policy stance,
the SBP continued recourse to Open Market
Operation (OMOs) more frequently to manage
liquidity at the desired levels in the inter-bank
market. (The SBP moped up Rs.766 billion during
July-Mar FY07 against the injection of Rs.118
billion as compared to Rs.700billion against the
injection of Rs.72 billion in corresponding period
of last year.)
Table-5.8 Summary of OMOs
(Rs.billion)
Injection
Absorption
FY 07
FY 08
FY 07
FY 08
Jul
133.5
141.8
Aug
21.2
105.7
228.3
Sep
87
71.3
Oct
40.9
81.3
Nov
61.9
124.7
Dec
25.8
117.2
69
Jan
27.5
60.2
52.3
Feb
11.7
70.9
Mar
25
49.55
42.1
8.1
Total
72
118
700.5
766.4
Source:SBP
The impact of tight monetary stance and liquidity
management began to translate into a rise in other
interest rates, with varied magnitude, at different
stages of the economy. For instance, 6 months
T-bills cutoff witnessed an increase of 97 basis
points
to
9.9
percent
during
Jul-Apr
FY08.Similarly, 6 months and 12-months KIBOR
also increased by 77 basis points and 63 basis
points to 10.38 percent and 10.71 percent
respectively at end April 2007 in the same way,
89
Pakistan Economic Survey 2007-08
6-months repo rates depicted an increase of 133
basis points to 9.98 percent during Jul-Apr FY08.
Fig 5.6 Weighted Average Interest Rates
Fig 5.7 Contribution of T-bills
100
10.5
6-Months
10
12-Months
9.5
FY 07
79.5
FY 08
8.5
8
40
20
19.1
9.1
3-Months
Table-5.9 Market treasury bills Auctions
Jul-Jun
FY 2006-07
Offered
3-Months
6-Months
12-Months
Total
Accepted
*W.A Rate
186,652
136,102
8.5
125,483
90,433
8.7
787,636
661,786
9.0
1,099,771
888,321
* Average of maximum and minimum rates
9.6
11.4
0
Feb-08
Oct-07
Jun-07
Feb-07
Oct-06
Jun-06
Feb-06
Oct-05
Jun-05
7.5
6-Months
12-Months
(Rs million)
Offered
FY 07
182,802
99,320
561,683
843,805
The SBP accepted Rs.495 billion from the primary
market of T-Bills during the first nine months of
FY08 as compared to Rs.696 billion in FY07
(Table-5.9). Market offered a total amount of Rs.
682 billion in first nine months of FY 08 as
compared to Rs.843 billion in the same period of
last year. In the first nine months of FY07 heavy
investment was in 12 months T-bills which
constituted almost 80 percent of the total accepted
amount due to the fact that 12-months T-bills
provided the highest interest earnings with zero
risk in the short run (Fig-5.7).
In order to develop the bond market, and to reduce
the cost of funds for financing the fiscal deficit in
the long run, Government has started PIBs auctions
since December 2000. In FY07, the supply of long
term government paper started to pick up pace as
the government started to hold primary auctions of
90
71.3
60
9
Percent
Percent
80
FY 08
49,625
64,325
568,790
682,740
Jul-Mar
Accepted
FY 07
133,152
66,920
496,433
696,505
FY 08
45,225
56,395
393,605
495,225
*W.A Rate
FY 07 FY 08
8.5
9.1
8.6
9.4
8.9
9.6
Source:SBP
PIBs in a more regular and predictable manner.
Regarding long-term interest rates, an important
development in FY07 was the extension of yield
curve to 30 years. Interest rates of long term
government securities also registered increase due
upward revision of discount rate, and yield curve
moved in the upward direction in the range of 81 to
110 basis points approximately. The SBP mopped
up Rs. Rs.68 billion from the primary market of
PIBs during the first nine months of FY08 as
compared to Rs.37 billion in the same period of
FY07 (Table-5.10). Market offered a total amount
of Rs.133 billion in first nine months of FY08 as
compared to Rs.100 billion in the same period of
last year. In the first nine months of FY07 heavy
investment was in 10 years PIBs which constituted
almost 33 percent of the total accepted amount.
(Fig 5.9).
Money and Credit
Fig 5.9 Contribution of PIBs
Fig 5.8 Weighted Average Interest rate of 10 Years PIB
FY 07
14
2
Table-5.10 Pakistan Investment Bonds Auctions
Jul-Jun
PIBs
FY 2006-07
Offered Accepted *W.A Rate
3 Years
36,982
10,882
9.54
5 Years
39,799
10,174
9.77
10 Years
65,986
30,211
10.31
15 Years
12,750
9,250
10.95
20 Years
20,200
11,250
11.28
30 Years
23,300
16,100
11.61
Total
199,017
87,867
* Average of maximum and minimum rates
3 Yrs
Aug-07
Aug-06
Aug-05
Aug-04
Aug-03
Aug-02
0
30 Yrs
4
20 Yrs
6
15 Yrs
8
10 Yrs
Percent
Percent
10
FY 08
40
35
30
25
20
15
10
5
0
5 Yrs
12
(Rs.million)
Offered
FY 07
FY 08
21,770
11,044
17,407
21,177
26,030
58,805
9,850
14,876
13,150
9,550
12,000
17,600
100,207 133,052
Table-5.11 Lending & Deposit Rates (W.A)
LR
DR
Spread
Jun-06
9.9
2.9
7.0
Jul-06
10.2
3.1
7.2
Aug-06
10.6
3.1
7.5
Sep-06
11.0
3.2
7.8
Oct-06
11.1
3.4
7.7
Nov-06
11.0
3.6
7.4
Dec-06
11.2
3.7
7.5
Jan-07
10.7
3.7
6.9
Feb-07
10.5
3.8
6.7
Mar-07
10.6
3.9
6.6
Apr-07
10.6
3.9
6.7
May-07
10.6
4.0
6.5
Jun-07
10.3
4.0
6.3
Jul-07
10.4
4.0
6.4
Aug-07
10.5
4.1
6.4
Sep-07
10.5
4.1
6.3
Oct-07
11.0
4.1
6.8
Nov-07
10.7
4.1
6.6
Dec-07
11.0
4.1
6.8
Jan-08
10.8
4.2
6.6
Feb-08
10.8
4.2
6.6
Mar-08
10.9
4.2
6.7
Source:SBP
Jul-Mar
Accepted
FY 07
FY 08
3,982
4,953
4,523
10,777
12,170
23,038
4,300
7,801
4,000
7,850
8,000
14,400
36,975
68,819
*W.A Rate
FY 07 FY 08
9.53
10.11
9.82
10.30
10.18
10.81
11.01
11.49
11.39
11.69
11.68
11.91
Source:SBP
At the second stage of monetary transmission,
changes in SBP policy rate translated into an
increase in financial institutions’ lending and
deposit rates (Table 5.11). The spread between the
lending and deposit rates has also decreased from 7
percent in June 2006 to 6.7 percent in March
2007.However, W.A. lending rate has declined by
10 basis points during December 2007 to March
2008.In the Interim Monetary Policy Measures
announced by the State Bank, all banks are
required to pay a minimum interest rate of 5
percent on saving deposit products; aimed at
encouraging people to save more.
Pakistan’s Financial Sector Performance
Financial stability in Pakistan has benefited from
structural transformation of the banking sector and
wide-ranging policy initiatives of the State Bank.
The country’s prudential regulatory regime has
been crafted to promote and preserve financial
sector stability. The regulatory framework
encourages
(i)
financial
sector
growth,
91
Pakistan Economic Survey 2007-08
diversification and innovation, (ii) healthy
competition and risk taking to ensure a sustainable
and aggressive income stream, (iii) opportunities
for enhancing the franchise value of banks,
(iv)prudent
behavior
and
effective
risk
management and loan provisioning requirement
are stringent enough to discourage infection of
loan portfolio, and (v) safeguarding social
obligations and consumer interests. Financial
sector stability has been further fostered by
strengthening of bank’s system wide capital base.
Financial stability will further benefit from State
Bank efforts to operationalize a Real-time Gross
Settlement System (RTGS) named as PRISM
(Pakistan Real Time Inter-bank settlement
Mechanism) in June 2008 that will allow shift from
traditional paper-based, end-of-the-day settlement
system to electronic payment system for large
value, low volume inter-bank funds’ transfers and
settlements. Financial sector is now predominantly
owned by the private sector which presents some
new challenges. The State Bank of Pakistan is now
working to develop an adequate policy framework
for consumer protection, development of Financial
Safety Nets such as Deposit Insurance ,and a welllaid out ‘Lender of last resort’ procedure. The
framework would strike a balance between
enhancing consumer protection and minimizing
moral hazard concerns.
Table 5.12 Asset Composition of the Financial Sector
FY 00
FY01
FY02
Investment Banks
40,989
30,862
27,001
Modaraba
15,278
15,561
17,456
Leasing
48,384
46,948
41,141
Discount Houses
1,805
1,395
1,527
Venture Capital Companies
1,027
346
272
Mutual Funds
25,347
24,175
29,094
Total Assets
125,587 120,723 122,298
CY 00
CY 01
CY 02
DFIs
91,496
61,145
68,729
Housing Finance
22,264
23,599
22,434
Insurance
n.a.
112,558 129,066
Total Assets
113,760 197,302 220,229
FY03
37,936
15,973
46,842
1,987
854
57,180
160,772
CY 03
78,803
21,562
150,330
250,695
FY04
35,568
18,026
44,806
1,341
1,005
103,080
203,826
CY 04
94,752
19,493
172,992
287,237
FY05
51,041
21,572
53,635
1,504
3,200
136,245
267,197
CY 05
107,811
18,657
201,665
328,133
FY06
54,527
23,927
63,999
1,834
4,131
177,234
325,652
CY 06
116,939
19,702
244,657
381,298
(Rs.million)
FY07
41,458
25,186
63,956
1,417
4,061
313,661
449,739
CY 07
n.a.
n.a.
n.a.
Source:SBP
Commercial Banks
The impressive performance of Pakistan’s banking
sector has attracted considerable FDI into the
industry in recent years. Commercial banks in
Pakistan operate on a sound capital base with a
commendable record of financial performance,
particularly in the last 3 years.
In Jul-Dec 2007-08, total number of branches of
banks was 8233 as compared to 7890 in 2006-07;
there has been an increase of 343 branches in the
first six months of FY07.Assets of all banks
showed a net expansion of Rs.203.1 billion in the
first six months of FY08 and stood at Rs.5155
billion as compared to Rs.4351 billion in the same
period of last year. An acceleration in private
sector credit contributed to increase in scheduled
banks’ assets. The total deposits of all banks
registered an increase of Rs.168 billion in the first
92
six months of FY08 and reached at the level of
Rs.3852 billion as compared to Rs. 3255 billion
recorded in the same period of last year.Net
investment of the banks showed an increase of
Rs.95 billion in Jul-Dec FY08 mainly contributed
by the private banks amounting to Rs.934 billion
as compared to Rs.601 billion for the six months of
last year. (Table 5.13)
The banking sector of Pakistan in recent years has
undergone a visible change as about 80 percent of
the banking assets are now controlled by the
private sector. While this has yielded significant
benefits in the form of increased competition,
product innovation, technological up-gradation and
diversification of business activities, a host of new
risks have also surfaced. This has necessitated the
adoption of international best practices by the
banks/DFIs in classification and provisioning
Money and Credit
against their loans and advances portfolio to
further strengthen the soundness and stability of
banking system.
Table-5.13 Performance of Scheduled Banks
30-Jun-07
1.No.of Branches
Nationalized Commercial Banks
Private Banks
Specialized Banks
Foreign Banks
2.Assets (Rs.Billion)
Nationalized Commercial Banks
Private Banks
Specialized Banks
Foreign Banks
3.Net Advances (Rs.Billion)
Nationalized Commercial Banks
Private Banks
Specialized Banks
Foreign Banks
4.Deposits (Rs.Billion)
Nationalized Commercial Banks
Private Banks
Specialized Banks
Foreign Banks
5.Net Investments (Rs.Billion)
Nationalized Commercial Banks
Private Banks
Specialized Banks
Foreign Banks
The NPLs are the most important indicator of
determining the asset quality of any bank because
the gross NPLs to gross advances and net NPLs to
net advances are considered as key indicators of
quality of lending. As on 30th September 2007, the
gross NPLs of the banking system recorded at
Rs.163 billion and gross NPLs to gross advances
were at 6.5%.For the financial results of 2008,
commercial banks were needed to provide Rs 24
billion excess provisioning as per SBP’s directive
regarding Forced Sales Value (FSV) of collateral.
On the basis of the provision provided by the
commercial banks against non-performing loans,
the net NPLs to net advances ratio rose to 2.4% .In
December 2007, the State Bank of Pakistan
withdrew the benefit of FSV against all non
performing loans (NPLs) for calculating
provisioning requirement which directly hampered
the profits of entire banking sector. Hence, the
7890
1696
5625
534
35
4952
964
3611
123
253.8
2498.9
464.7
1838.4
71.5
124.2
3683.7
756
2745.2
13.6
168.9
1180.3
243.9
879.7
14.9
41.8
Jul-Dec
2006-07
7852
1690
5597
534
31
4351.9
836.2
3173
119
223.8
2427.7
429.7
1807.2
70.6
120.2
3255
665.6
2425.8
13.5
150.1
836.7
179.9
601.7
16.6
38.5
2007-08
8233
1715
5935
534
49
5155.1
1017.2
3845.2
119.9
172.9
2694
488.7
2044.4
72.2
88.7
3852
813.1
2907.8
13.5
117.6
1275.5
298.7
934.5
15.8
26.5
Source:SBP
banks have to go for 100 percent provisioning
against the NPLs. However, liquid assets are being
subtracted to calculate provisioning against NPLs.
Therefore, the banks will show fewer profits due to
higher provisioning against their NPLs. Earlier,
there was an option for the banks to shelter the
actual required provisioning by showing collateral
process higher than the actual value. Due to FSV,
major impact would result in high recovery of
NPLs. The SBP further elaborated that the
classified loans and advances that have been
guaranteed by the government would not require
provisioning. According to an analysis; private
commercial banks will face biggest impact for SBP
provisioning policy while foreign banks would
face the least impact. The SBP’s timely decision to
eliminate the benefit of FSV of collateral will help
the banks to improve their loan quality and
recovery rate going forward. The measure taken by
93
Pakistan Economic Survey 2007-08
SBP to streamline the financial sector is seen as a
positive step and will help the banks to strengthen
their balance sheets.
considerations, by giving them the opportunity to
choose between the two parallel modes of
financing and investment.
Islamic banks
The Islamic Financial industry in Pakistan has
grown substantially since the launch of SBP’s
focused strategy to promote a parallel Islamic
Banking system in 2001.This performance is
commendable for such a short period, given that
other countries have achieved similar levels of
growth in their respective Islamic banking
industries after several years of existence. Besides
banks, IFIs in Pakistan include Islamic Mutual
Funds, Shariah-compliant housing finance
services, takaful companies and modarabas. Sukuk
issuances have also attracted considerable attention
in recent years.
Initially conceived in response to a faith-based
logic of conforming to the principles of Shariah in
all spheres of life, the astounding growth of the
Islamic Financial Industry also drew on the wealth
accumulation in oil-rich countries in the ensuing
years, and reflects its potential of financially viable
and lucrative segment of the global financial
system. Islamic Financial Institution (IFIs) have
been successful in tapping the previously excluded
market on faith-based considerations, as well as the
already included segment on preference-based
Table 5.14 Islamic Banks
Assets of the Islamic banks
Deposits of the Islamic Banks
Share in Banks Assets
Share in Bank Deposits
FY03
FY04
FY05
FY06
FY07
12,915
8,397
0.50%
0.40%
44,143
30,185
1.40%
1.25
71,493
49,932
2.10%
1.90%
119,294
83,740
2.90%
2.80%
205,212
146,945
4.20%
4.10%
The overall deposits of IBIs at the end of February
2008 stood at Rs.141,933 million and reflected a
share of 3.9 percent in banks assets as compared to
0.4 percent only in FY03, the downward trend in
FY 08 as compared to last year was inline with the
decreasing trend in deposits of all banks that began
in January 2008. Total assets of the Islamic banks
reached at Rs.200,415 million from Rs.12,915
million in FY03 and contributed 4.1 percent in
banking assets till end of February 2008 (Table
5.14). The industry has over the years managed to
offer a wide array of products encompassing
almost the entire range of modes of Islamic
financing that are able to cater to the needs of
majority of the sectors of the economy. The
segments covered by the industry include
Corporate / Commercial, Agriculture, Consumer,
Commodity financing, SME Sector, Treasury and
Financial institutions and manufacturing and
Services concerns through various Shariah
complaint modes.
Table 5.14 (a) Financing Products by Islamic banks (%age)
Mode of Financing
FY03
FY04
FY05
Murabaha
79.4
57.4
44.4
Ijara
16.5
24.8
29.7
Musharaka
1
0.8
Mudaraba
Diminishing Muskaraka
1.2
5.9
14.8
Salam
1.6
0.7
1.9
Istisna
0.4
1.4
Qarz/Qarz-e-hasna
Others
1.3
9.8
3
The highest share in financing products of Islamic
banks is contributed by Murabaha, Ijara, and
Diminishing Musharaka in FY08 (March).As the
94
(Rs.million)
FY08
(March)
200,415
141,933
4.10%
3.90%
FY06
48.4
29.7
0.8
14.8
1.9
1.4
3
FY07
38.9
25.4
0.9
0.3
25.1
1.4
0.9
7.1
FY08(March)
38.7
24.2
1.3
0.2
24.8
1.6
2.4
6.7
industry develops, SBP continues to provides an
enabling environment for Islamic Banks. Work is
underway on the development of Bait-ul-Maal
Money and Credit
certificates to provide a sovereign instrument for
liquidity management, and risk management
guidelines have been issued.
Microfinance Institutions
The operations of MFIs, including Microfinance
Banks (MFBs), Non-Government Organizations
(NGOs), Rural Support programs (RSPs) and
Commercial Financial Institutions (CFIs) have
witnessed significant improvements, which are
reflected in almost all aspects of the microfinance
industry. Number of new MFBs branches has
grown, total assets have increased, products are
being gradually diversified, outreach is being
extended, branch network is being expanded and
growth has been achieved in the total number of
borrowers and advances.
With a focus on expanding microfinance reach to 3
million borrowers by 2010, a strategy for
Expanding Microfinance Outreach (EMO) has
been developed by the SBP which was approved
by the Government in February 2007.The EMO
strategy stresses on the fact that commercialization
of the sector is key to financial and social
sustainability.
Table 5.15 Disbursement of Loans by Microfinance
Banks
(Rs.million)
July-March
Institution
2006-07
2006-07 2007-08
Khushali Banks
3610900 2355041 2590058
Microfinance
Banks ( Others)
2500968 1875405 2298604
Total
6111868 4230446 4888662
During Jul-Mar 2008, Khushali Bank, which leads
the microfinance sector in Pakistan disbursed loans
amounting Rs.2.6 billion as compared to Rs.2.3
billion in the same period last year. While the share
of all other microfinance banks in loan
disbursement increased to Rs. 2.3 billion in
Jul-Mar FY08 from Rs. 1.8 billion in the Jul-Mar
FY07.
Small and Medium Enterprises
The importance of the SME sector cannot be
overemphasized in the overall industrial
development of a country. SMEs constitute nearly
90% of all the enterprises in Pakistan; they employ
80% of the non-agriculture labor force; and their
share in the annual GDP is nearly 40%.During
FY08, credit to SME sector has decreased to Rs.18
billion from Rs.30 billion during FY07. Mining,
Electricity, Commerce and other private business
sector registered in crease while Manufacturing,
Services, Communication, Construction sectors
recorded a substantial decrease.
Table-5.16 Credit to SME
(Rs .million)
Stocks
Flows
Sector
Jun-06 Jun-07 FY 07 FY 08
Mining and
Quarrying
822
790
172
303
153147 160791 15628 5856
Manufacturing
Ship Breaking
959
539
-526
-284
Electricity and Gas 1872
2681
860
1534
Commerce and
123723 126457 1599 5447
Trade
23163 30831 4973 -1892
Services
Transport and
Communications
9711
11956
553
72
Construction
12976 16370 1802 -335
Other Private
Business
32318 34809 5032 7360
Total
358692 385223 30091 18059
Source:SBP
Non-Bank Financial institutions (NBFIs)
The major objective of the introduction of the
concept of NBFCs i.e. Non-Banking Finance
Companies in 2002, was to enable the existing
(mainly) single-product institutions serving
specific market niches, to offer a whole variety and
range of financial products though a one window
operation akin to universal banking, subject to
compliance with the prescribed progressivelytiered regulatory requirements. It was expected that
consolidation of different financial services under
one umbrella would lead to the emergence of
stronger, well-capitalized entities, which will
provide a fillip for the future development of the
non-bank financial sector.
The key market players in the non-bank financial
sector of Pakistan are non-banking Finance
Companies (NBFCs), mutual funds, modarabas
and Development Finance Institutions (DFIs).The
non –bank financial sector has historically played
95
Pakistan Economic Survey 2007-08
an important role in the mobilization and
channeling of savings in the financial system. The
NBFIs have, in recent years benefited from an
environment of low interest rates coupled with
high economic growth but have been unable to
create an impact as well-functioning, specialized
financial intermediaries.
The success story among NBFIs is that of mutual
funds. The mutual fund sector is rapidly growing
in Pakistan and accounted for the largest chunk in
total assets of non-bank financial sector. Between
FY00 to FY 07, net assets of mutual funds have
grown by more than 12 times to reach Rs.313
billion from Rs.25 billion only in FY 00.
sector entities. However, with two-thirds of the
population living in the rural areas and low per
capita income, the insurance sector faces various
hurdles in its growth.
The growth in insurance sector is reflected in the
increase in premiums and profitability, as well as
assets for both life and non-life insurance. Private
sector companies have launched innovative
products in the recent past, such as livestock and
crop insurance, which will help promote the
quality of bank’s lending to agriculture sector.
Fig 5.11 Assets of Insurance Sector
300
Fig 5.10 Assets of Mutual Funds
313.7
300
Rs.billion
250
177.2
200
103.1
100
50
25.3
24.2
29.1
136.2
57.2
Rs.billion
350
150
244.7
250
201.7
200
150
112.6
129.1
150.3
173.0
100
50
0
CY 01
CY 02
CY 03
CY 04
CY 05
CY 06
0
FY 00 FY01 FY02 FY03 FY04 FY05 FY06 FY07
Insurance Sector
The role of the insurance sector is significant in
promoting the stability, not just of the financial
sector, but also of the overall macroeconomic
environment as it provides protection against
uncertainty to economic agents by an equitable
transfer of risk. Life insurance companies in
particular, due to the long –term nature of their
premiums, are also among the large institutional
investors for capital and money market
instruments.
The insurance sector in Pakistan consisting of life,
non-life and the sole reinsurance company
(PRCL), has seen considerable improvements since
2001 on account of rise in the demand for
insurance by corporate, households and public
96
The low insurance penetration highlights the need
for concerted efforts to bring about reforms that
would increase the competitiveness and outreach
of Pakistan’s insurance industry. As a step in this
direction, Insurance Ordinance 2000 has laid out
targets that will help the expansion of the industry
in the coming years, for instance, the recent
increase in capital requirements will result in the
emergence of stronger players in the industry.
Appointment of the Insurance Ombudsman is
another measure which would also go a long way
in boosting the confidence of the public by setting
complaints expeditiously. Other insurance sector
reforms envision the privatization of State Life
Insurance Corporation (SLIC), the largest state
owned operator in the life insurance sector.
Moreover, Postal Life Insurance is planned to be
brought under the ambit of the Insurance
Ordinance 2000.Foreign investment rules in the
insurance sector have also been amended in order
to attract FDI in the sector.
Table 5.1
COMPONENTS OF MONETARY ASSETS
Stock Rs. in million
1.
Currency Issued
2.
Currency held by SBP
3.
Currency in title of Scheduled Banks
4.
Currency in ciculation (1-2-3)
5.
Other deposits with SBP 1
6.
Scheduled Banks Total Dposits 2
7.
Resident Foreign Currency
Deposits (RFCD)
8.
9.
FY 08
March 07 Mar-08 (P)
2001
2002
2003
2004
2005
2006
2007
396,548
462,095
527,557
617,508
712,480
791,834
901,401
887,301
1,048,617
1,905
1,865
2,565
2,960
3,107
3,005
3,148
3,162
2,855
19,178
26,414
30,415
36,432
43,472
48,439
58,072
49,615
63,761
375,465
433,816
494,577
578,116
665,901
740,390
840,181
834,524
982,001
11,292
13,847
3,499
2,116
3,335
4,931
7,012
5,595
3,850
1,139,287
1,304,214
1,580,399
1,905,260
2,291,408
2,661,584
3,217,962
2,948,582
3,422,237
154,154
157,456
126,138
145,694
180,295
195,501
207,312
200,484
234,882
MI
1,275,615
1,494,140
1,797,361
2,174,736
2,512,214
2,720,685
3,155,635
2,896,466
3,365,665
Monetary assets (4+5+6)
1,526,044
1,751,877
2,078,475
2,485,492
2,960,644
3,406,905
4,065,155
3,788,701
4,408,088
9.0
14.8
18.6
19.6
19.1
15.1
19.3
11.2
8.4
24.6
24.8
23.8
23.3
22.5
21.7
20.7
22.0
22.3
10. Growth rate (%)
Memorandum
1.
Currency / Money ratio
2.
Demand Deposits / Money ratio
24.6
24.0
29.2
31.8
32.1
31.9
65.0
63.7
65.0
3.
Time Deposits / Money ratio
40.0
41.5
40.7
39.0
39.2
40.5
9.0
8.9
7.3
4.
Other Deposits / Money ration
0.7
0.8
0.2
0.1
0.1
0.1
0.2
0.1
0.1
5.
RFCD / Money ration
5.3
5.3
6.
Income Velocity of Money 3
10.1
9.0
6.1
5.9
6.1
5.7
5.1
2.6
2.5
2.5
2.4
2.4
2.1
2.0
P : Provisional
1 Excluding IMF A/c Nos 1 & 2 SAF Loans A/c deposits money banks, counterpart funds, deposits of foreign central banks and foreign governments.
2 Excluding inter banks deposits and deposits of federal and provincial governments, foreign constituents and international organization etc.
3 Income velocity of money is taken as GDP at current factor cost / quarterly average of monetary assets (A2)
Explanatory Notes:
a Data series on monetary aggregates other than M1 are based on weekly returns reported by scheduled banks to SBP.
b Data series on M1 aggregates (as Sr. # 8) is issued on monthly returns reported by scheduled banks to SBP and published is Statistical Bulletin from
Aril 2008.
c The stock data of M2 has been revised since June 2002 due to treatment of privatization commission deposits with NBP as government deposits.
These deposits were previously included private sector deposits which have now being included in government deposits.
d Totals may not tally due to separte rounding off
TABLE 5.2
CAUSATIVE FACTORS ASSOCIATED WITH MONETARY ASSETS
(Rs million)
1991
1992
1993
1994
1995
1996
1997
1998
495047
434062
47377
-12522
574023
504562
53079
-15392
630745
552580
63664
-18518
36434
37657
A. End June Stock
1 Public Sector Borrowing (net)
( i + ii + iii + iv + v + vi + vii )
i
Net Budgetary Support
ii
Commodity Operations
iii
Zakat Fund etc.
iv
Utilization of privatization
proceeds by Govt./WAPDA
v
Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi
Payment to HBL on A/C of HC&EB
2 Non-Government Sector
i
Autonomous Bodies1
ii
Net Credit to Private Sector
& PSCEs
a. Private Sector
b. Public Sector Corp.
other than 2(i)
3 Counterpart Funds
4 Other Items (Net)
5 Domestic Credit (1+2+3+4)
6 Foreign Assets (Net)
7 Monetary Assets (5+6)
201174
194501
18675
-12002
270165
257074
22869
-9778
345167
322772
30204
-7809
373433
345917
36786
-9270
-
-
-
-
-
-
-
-
426520
382336
41519
-11465
-
-
14130
26130
-4660
260962
9374
292381
10661
352954
14594
392820
13744
462357
16955
531064
20121
602828
29196
-5749
287
696672
28302
251588
221062
281720
251311
338360
309595
379076
352363
445402
416094
510943
478701
573632
546814
668370
632025
30526
-330
-36857
424949
-24305
400644
30409
-151
-41500
520895
-15326
505569
28765
-546
-52846
644729
-49339
595390
26713
-388
-46537
719328
-15930
703398
29308
-464
-74705
813708
11027
824735
32242
-617
-58844
966650
-27971
938679
26818
-736
-61621
1114494
-61260
1053234
36345
-650
-45290
1281477
-75157
1206320
B. Changes over the year (July-June)
8 Public Sector Borrowing (net)
( i + ii + iii + iv + v + vi + vii )
i
Net Budgetary Support
ii
Commodity Operations
iii
Zakat Fund etc.
iv
Utilization of privatization
proceeds by Govt./WAPDA
v
Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi
Payment to HBL on A/C of HC&EB
9 Non-Government Sector
i
Autonomous Bodies1
ii
Net Credit to Private Sector
& PSCEs
a. Private Sector
b. Public Sector Corp.
other than 2(i)
10 Counterpart Funds
11 Other Items (Net)
12 Domestic Credit Expansion
(8+9+10+11)
13 Foreign Assets (Net)
14 Monetary Expansions
(13+14)
27438 2
38332 2
-5315
-5579
-
68991
62573
4194
2224
-
75002
65698
7335
1969
-
28266
23145
6582
-1461
-
53087
36419
4733
-2195
-
68527
51726
5858
-1057
-
80933
72457 9
5702
(2870)
56722
48018
10585
(3126)
10304
1223
-1089
287
0
83414 *
-894
*
84308 *
74781
21702
592
31419
1287
60573
3933
39866
-850
14130
69537
3211
12000
63429
3166
-4660
0
61879 4,9
-242 7
21110
25096
30132
30249
56640
58284
40716
42768
66326
63731
60263
57329 3
62121
59907 4
-3986
178
4362
-117
179
-4643
-1644
-395
-11346
-2052
158
6309
2595
-76
-28168
2934
-153
21139 3
53680 2
5712 2
95946
8979
123834
-34013
74599
33409
94380
26957
152942
-38998
147845
-33289
166983
(13897)
104925
89821
108008
121337
113944
114556
153086
(Contd.)
59392
2214 7,9
-119
5152 4,9
9527
86
26761
*
TABLE 5.2
CAUSATIVE FACTORS ASSOCIATED WITH MONETARY ASSETS
1999
(Rs million)
2000
2001
2002
2003
2004
A. Stock End June
1 Public Sector Borrowing (net)
(i + ii + iii + iv + v + vi + vii)
i Net Budgetary Support
ii Commodity Operations
iii Zakat Fund etc.
iv Utilization of privatization
proceeds by Govt./WAPDA
v Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi Payment to HBL on A/C of HC&EB
2 Non-Government Sector
i Autonomous Bodies1
ii Net Credit to Private Sector
& PSCEs
a. Private Sector
b. Public Sector Corp. other than 2(i
c. PSEs Special Account Debt Repay
d. Other Financial Institutions (NBFI
3 Counterpart Funds
4 Other Items (Net
5 Domestic Credit (1+2+3+4)
6 Foreign Assets (Net)
7 Monetary Assets (5+6)
583598
505887 8
67309
(21793)
661832
545850 8
107403
(23616)
601870
4998888 8
95311
(25524)
677054
567208
100642
(22991)
598623
511186
74047
(18805)
656729
574886
65873
(16224)
37657
37657
37657
37657
37657
37657
(5749)
287
816710
41351
775359
(5749)
287
842752
68637
774115
(5749)
287
902603
75240
827363
(5749)
287
921596
60159
861437
(5749)
287
1048162
55370
992892
(5749)
287
1363669
34293
1329376
735887
43124
(3652)
0
(589)
(73544)
1326175
(45629)
1280546
754190
28826
(8901)
0
(611)
(59087)
1444886
(44254)
1400632
750211
37036
(12241)
52357
(562)
(6202)
1497707
28338
1526046
841057
35563
(15183)
37877
(536)
(67463)
1530651
230718
1761370
949030
32386
(18802)
30278
(586)
(107258)
1539041
539664
2078704
1274245
53852
(22108)
23387
(628)
(116405)
1903367
583190
2486556
(78361)
(55952)
(26595)
4186
58106
63700
(8174)
2581
B. Changes over the year (July-June)
8 Public Sector Borrowing (net)
(i+ii+iii+iv+v+vi+vii)
i Net Budgetary Support
ii Commodity Operations
iii Zakat Fund etc.
iv Utilization of privatization
proceeds by Govt./WAPDA
v Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi Payment to HBL on A/C of HC&EB 9 Non-Government Sector
i Autonomous Bodies1
ii Net Credit to Private Sector & PSCEs
a. Private Sector
b. Public Sector Corp. other than 2(i
c. PSEs Special Account Debt Repay
d. Other Financial Institutions (NBFI
10 Counterpart Funds
11 Other Items (Net)
12 Domestic Credit Expansion (8+9+10+11)
13 Foreign Assets (Net)
14 Monetary Expansions (13+14)
(74824) #
(75193) 8'#'
3645
(3275)
119214
13049
106165
103038
6779
(3652)
0
61
246 #
44697
29529
74226
78234
39963 8
40094
(1823)
(46731)
(32315) 8@
(12508)
(1908)
22177
14313
5331
2533
-
-
-
-
-
-
-
-
-
-
26044
3125 7
22916
18303
9862 7
(5249)
0
(22)
14457
118711
1375
120086
69194
11573
57620
48633
12327
(3340)
0
49
30863
53374
72654
126028
@
7
@
@
7 The difference in flow data is due to change in the composition of autonomous bodies.
8 Special Account-Debt Repayment Adjusted.
# Adjusted for Rs 28.5 billion on account of Adhoc Treasury Bills created to offset the government
losses due to the unification of exchange rate
@' The difference in flow data is due to change in the total number of PSES
18993
(15081)
34074
52969
(1473)
(2942)
(14480)
26
(12040)
29156
206168
235324
148539
(4789)
153328
167723
(3177)
(3619)
(7599)
(50)
(61674)
8454
308946
317400
315407
(21077)
336484
325215
21466
(3306)
(6891)
(42)
(9147)
364326
43526
407852
(Contd)
TABLE 5.2
CAUSATIVE FACTORS ASSOCIATED WITH MONETARY ASSETS
(Rs million)
End March
2005
2006
2007
2007
2008 P
A. Stock End June
1 Public Sector Borrowing (net)
(i + ii + iii + iv + v + vi + vii)
i Net Budgetary Support
ii Commodity Operations
iii Zakat Fund etc.
iv Utilization of privatization
proceeds by Govt./WAPDA
v Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi Payment to HBL on A/C of HC&EB
2 Non-Government Sector
i Autonomous Bodies1
ii Net Credit to Private Sector
& PSCEs
a. Private Sector
b. Public Sector Corp. other than 2(i)
c. PSEs Special Account Debt Repayment
d. Other Financial Institutions (NBFIs)
3 Counterpart Funds
4 Other Items (Net
5 Domestic Credit (1+2+3+4)
6 Foreign Assets (Net)
7 Monetary Assets (5+6)
752515
646682
87836
(14198)
833686
708037
107762
(14308)
926530
810053
98552
(14269)
909342
829901
61722
(14476)
1238722
1119187
101239
(13899)
37657
37651
37657
37657
37657
(5749)
287
1782368
32224
1750144
(5749)
287
2190769
36979
2153790
(5749)
287
2576474
58148
2518326
(5749)
287
2461120
39958
2421162
(5749)
287
2955791
81627
2874164
1712093
44838
(23714)
16927
(539)
(204929)
2329415
636938
2966352
2113890
47237
(23225)
15889
(546)
(327346)
2696564
710341
3406905
2479608
46010
(23478)
16187
(519)
(422223)
3080263
984982
4065155
2385708
42756
(23446)
16144
(509)
(360492)
3009461
779240
3788701
2832887
48427
(23504)
16353
(533)
(507986)
3685994
722094
4408088
B. Changes over the year (July-June)
8 Public Sector Borrowing (net)
(i+ii+iii+iv+v+vi+vii)
i Net Budgetary Support
ii Commodity Operations
iii Zakat Fund etc.
iv Utilization of privatization
proceeds by Govt./WAPDA
v Use of Privatization proceeds/
NDRP Fund for Debt Retirement
vi Payment to HBL on A/C of HC&EB
9 Non-Government Sector
i Autonomous Bodies1
ii Net Credit to Private Sector & PSCEs
a. Private Sector
b. Public Sector Corp. other than 2(i)
c. PSEs Special Account Debt Repayment
d. Other Financial Institutions (NBFIs)
10 Counterpart Funds
11 Other Items (Net)
12 Domestic Credit Expansion (8+9+10+11)
13 Foreign Assets (Net)
14 Monetary Expansions (13+14)
95785
71796
21963
2026
86879
67063
19926
(110)
92844
102015
(9210)
39
75656
121864
(46040)
(168)
-
-
-
-
-
-
-
-
-
-
418699
(2069)
420768
437848
(9014)
(1606)
(6460)
88
(88525)
426048
53748
479796
408401
4755
403646
401797
2399
489
(1038)
(7)
122416
372857
73403
446260
385705
21169
364536
365718
(1227)
(253)
298
27
(94877)
383699
274551
658250
Till end June 1996 autonomous bodies consisted of WAPDA, OGDC, PTC, NFC,and PTV, thereafter
1 their composition has been changed as WAPDA, OGDC, PTC, SSGC SNGPL, KESC and Pakistan
Railways.
2 Adjusted for SAF loans amounting to Rs 7371 million
3 Adjusted for Rs 5278 million to exclude the impact arising due to mark up debited to the borrowers account.
4 Adjusted for Rs 8207million being mark up debited to the borrowers account
5 Credit to NHA by commercial Banks.
6 Credit to NHA and CAA by commercial banks
Note: Figures in the parentheses represent negative signs.
P : Provisional
312191
309135
2687
370
270351
379317
2979
23479
267372
355838
271819
353279
(4481)
2418
(221)
(25)
255
166
37
(14)
(33147)
(85763)
312897
605731
68899
(262798)
381796
342934
Source: State Bank of Pakistan
TABLE 5.3
SCHEDULED BANKS POSITION BASED ON WEEKLY RETURNS: LIABILITIES AND ASSETS
(Rs million)
Outstanding Amount at end June
1993
LIABILITIES
1. Capital (paid-up) and Reserves
Demand liabilities in Pakistan
36,011
2. Inter-banks Demand Liabilities
12,822
2.1 Borrowing
(1,436)
2.2 Deposits
(11,386)
3. Deposits (General)
217,711
4. Other Liabilities
9,112
5. Total Demand Liabilities (2+3+4)
239,645
TIME LIABILITIES IN PAKISTAN
6. Inter-banks Time Liabilities
4,937
6.1 Borrowing
(3,976)
6.2 Deposits
(961)
7. Time Deposits (General)
270,343
8. Other Liabilities
3,920
9. Total Time Libilities (6+7+8)
279,200
10. Total Demand and Time Liabilities
518,845
11. Borrowing From SBP
64,577
12. Borrowing from Banks Abroad
14,614
6,584
13. Money at Call and Short Notice in Pakistan
14. Other Liabilities
505,570
15. Total Liabilities
1,146,201
16. Total Statutory Reserves
26,271
16.1 On Demand Liabilities
(12,311)
16.2 On Time Liabilities Assets
(13,960)
ASSETS
17. Cash in Pakistan
11,301
18. Balances with SBP
48,745
19. Other Balances
8,920
7,002
20. Money at Call and Short Notice in Pakistan
21. 17+18+19+20 as % of 10
14.6
FOREIGN CURRENCY
22. Foreign Currency held in Pakistan
2,194
23. Balances with Banks Abroad
6,190
24. Total Foreign Currency
8,384
BANK CREDIT ADVANCES
25. To Banks
7,830
26. To Others
308,992
27. Total Advances
316,822
28. Bills Purchased and Discounted
44,149
29. Total Bank Credit
360,971
30. 29 as % of 10
69.6
INVESTMENT IN SECURITIES AND SHARES
31. Central Government Securities
140,124
32. Provincial Government Securities
3,727
33. Treasury Bills
35,660
34. Other Investment in Securities & Sahres
31,331
35. Total Investment in Securities and Shares
210,842
36. 35 as % of 10
40.6
37. Other Assets
490,036
38 Advance Tax Paid
39 Fixed Assets
40 Total Assets
1,146,201
41 Excess Reserves (18-16)
22,474
1994
1995
1996
1997
1998
1999
2000
2001
43,770
14,532
(2,878)
(11,654)
256,188
12,578
283,298
50,533
16,787
(5,104)
(11,683)
296,739
16,500
330,026
56,255
13,281
(115)
(13,166)
339,408
19,224
371,913
60,935
13,722
(407)
(13,315)
358,457
21,654
393,833
91,060
10,991
(78)
(10,913)
411,361
25,120
447,472
75,632
7,968
(61)
(7,907)
454,072
38,491
500,531
79,648
8,580
(43)
(8,537)
475,281
47,420
531,281
88,581
12,282
(34)
(12,248)
527,672
42,870
582,824
7,181
(3,333)
(3,848)
342,368
4,812
354,361
637,659
70,583
14,217
6,721
640,164
1,413,114
32,219
(14,501)
(17,718)
9,059
(5,998)
(3,061)
405,882
3,388
418,329
748,355
82,668
14,280
8,350
743,430
1,647,616
37,835
(16,919)
(20,916)
5,509
(2,965)
(2,544)
495,677
4,737
505,923
877,836
56,914
13,424
8,070
897,892
1,910,391
44,295
(18,999)
(25,296)
5,422
(3,618)
(1,804)
571,574
5,369
582,365
976,198
77,999
14,622
5,370
993,960
2,129,084
49,078
19,960
(29,118)
10,658
(7,744)
(2,914)
628,076
7,141
645,875
1,093,347
113,919
16,518
7,768
264,981
1,587,593
55,056
(22,762)
(32,294)
8,633
(5,845)
(2,788)
661,401
8,329
678,363
1,178,894
142,147
22,089
17,528
298,019
1,734,309
59,821
(25,903)
(33,918)
6,300
(5,674)
(626)
652,279
10,759
669,338
1,200,619
141,016
16,657
42,469
321,224
1,801,633
59,287
(26,135)
(33,152)
4,705
(3,668)
(1,037)
712,978
9,494
727,177
1,310,001
139,367
15,169
30,293
400,517
1,983,928
64,651
(28,527)
(36,124)
13,959
63,746
14,814
7,062
15.6
16,363
78,503
11,012
8,814
15.3
19,328
63,502
14,516
8,989
12.1
17,821
89,756
16,864
5,772
13.2
18,769
84,740
18,210
8,903
11.9
18,870
100,335
19,116
18,095
13.3
19,468
153,371
18,250
43,509
19.5
19,178
147,962
18,033
31,179
16.5
4,261
7,899
12,160
3,017
8,163
11,180
3,667
16,545
20,212
4,647
10,918
15,565
2,706
21,798
24,504
2,981
39,019
42,000
2,222
46,619
48,841
4,788
70,856
75,644
8,616
347,868
356,484
52,483
408,967
64.1
13,482
413,811
427,293
59,649
486,942
65.1
5,449
474,731
480,180
62,511
542,691
61.8
3,690
552,522
556,212
70,675
626,887
64.2
5,687
644,049
649,736
63,073
712,809
65.2
4,402
725,852
730,254
63,774
794,028
67.4
5,788
801,154
806,942
69,554
876,496
73.0
3,657
866,490
870,147
75,504
945,651
72.2
147,076
3,345
83,443
32,632
266,496
41.8
625,910
1,413,114
31,523
166,687
3,340
90,059
35,210
295,296
39.5
739,506
1,647,616
40,668
144,922
3,338
137,110
42,512
327,882
37.4
913271.0
1,910,391
19,207
134,417
2,399
167,945
39,023
343,784
35.2
1,012,645
2,129,084
40,678
123,647
2,148
235,388
40,900
402,119
36.8
254,970
49,332
13,237
1,587,593
29,684
115,671
1,969
204,160
69,069
390,869
33.2
255,378
69,564
26,054
1,734,309
40,514
115,536
1,730
103,790
65,993
287,049
23.9
252,114
72,941
29,594
1,801,633
94,048
101,161
1,836
123,889
70,048
296934
22.7
340,220
78,205
30,922
1,983,928
83,311
Contd.
TABLE 5.3
SCHEDULED BANKS POSITION BASED ON WEEKLY RETURNS: LIABILITIES AND ASSETS
Outstanding Amount at end June
2002
2003
2004
LIABILITIES
1.
Capital (paid-up) and Reserves
Demand liabilities in Pakistan
85,886
112,230
131225
2.
Inter-banks Demand Liabilities
13,261
9,937
20755
2.1 Borrowing
(10)
(1)
(15)
2.2 Deposits
(13,251)
(9,936)
(20740)
3.
Deposits (General)
609,657
785,333
1014947
4.
Other Liabilities
47,333
53,352
56532
5.
Total Demand Liabilities (2+3+4)
670,251
848,622
1092234
TIME LIABILITIES IN PAKISTAN
6.
Inter-banks Time Liabilities
2,104
3,991
4806
6.1 Borrowing
(659)
(621)
(1878)
6.2 Deposits
(1,445)
(3,370)
(2928)
7.
Time Deposits (General)
803,749
903,153
1026919
8.
Other Liabilities
12,808
16,020
20703
9.
Total Time Libilities (6+7+8)
818,661
923,164
1052428
10. Total Demand and Time Liabilities
1,488,912
1,771,786
2144662
11. Borrowing From SBP
135,556
137,882
162335
12. Borrowing from Banks Abroad
12,642
21,243
9872
31,877
28,551
27479
13. Money at Call and Short Notice in Pakistan
14. Other Liabilities
546,159 *
468,312 *
527452
15. Total Liabilities
2,301,032
2,540,004
3003025
16. Total Statutory Reserves
73,677
87,893
105955
16.1 On Demand Liabilities
(32,850)
(41,934)
(53574)
16.2 On Time Liabilities Assets
(40,828)
(45,959)
(52381)
ASSETS
17. Cash in Pakistan
26,414
30,415
36432
18. Balances with SBP
124,883
140,077
151406
19. Other Balances
27,268
31,306
36762
32,831
28,686
30444
20. Money at Call and Short Notice in Pakistan
21. 17+18+19+20 as % of 10
14.2
13.0
12.0
FOREIGN CURRENCY
22. Foreign Currency held in Pakistan
5,003
5,435
4806
23. Balances with Banks Abroad
89,416
68,578
60976
24. Total Foreign Currency
94,419
74,013
65782
BANK CREDIT ADVANCES
25. To Banks
1,626
253
63
26. To Others
894,524
988,572
1258022
27. Total Advances
896,150
988,825
1258085
28. Bills Purchased and Discounted
75,588
80,687
99924
29. Total Bank Credit
971,738
1,069,512
1358009
30. 29 as % of 10
65.3
60.4
63.3
INVESTMENT IN SECURITIES AND SHARES
31. Central Government Securities
154,292
191,709
240842
32. Provincial Government Securities
1,728
1,234
77
33. Treasury Bills
231,507
412,449
408438
34. Other Investment in Securities & Sahres
83,493
118,234
132026
35. Total Investment in Securities and Shares
471,020
723,626
781,383
36. 35 as % of 10
31.6
40.8
36.4
353,842 *
442162
37. Other Assets
456,377 *
38. Advance Tax Paid
64,270
49,789
53879
39
Fixed Assets
31,812
38,738
46766
40. Total Assets
2,301,032
2,540,004
3003025
41. Excess Reserves (18-16)
51,206
52,184
45451
Figures in the parentheses represent negative sing, * : Contra Items, P : Provisional
(Rs million)
End March
2007
2008 P
2005
2006
2007
190,652
22,993
(99)
(22,894)
1,211,674
70,107
1,304,774
315,414
28,608
0
(28,608)
1,350,011
97,266
1,475,885
484,296
54,796
0
54,796
2,889,589
137,089
3,081,474
430,537
45,472
0
45,472
2,631,817
128,930
2,806,219
561,557
35,910
0
35,910
3,139,258
163,956
3,339,125
10,756
(1,024)
(9,732)
1,231,745
27,288
1,269,789
2,574,563
185,068
6,245
22,243
645,616
3,624,387
127,041
(64,089)
(62,952)
25,759
0
(25,759)
1,490,182
34,236
1,550,177
3,026,061
198,725
2,953
172,893
168,011
3,884,057
148,585
72,364
76,221
3,861
0
3,861
512,565
69,786
586,212
3,667,686
269,109
7,015
220,941
136,119
4,785,167
229,338
211,867
17,471
8,775
0
8775
465,880
62,934
537,589
3,343,808
252,056
6,146
135,765
148,762
4,317,075
209,117
193,252
15,864
5,889
0
5,889
474,671
81,119
561,679
3,900,804
234,002
9,781
196,087
200,637
5,102,867
247,899
231,225
16,674
43,462
188,092
49,021
22,166
11.8
48,439
202,501
56,460
232,535
17.8
58,072
307,433
65,656
239,031
18.0
49,615
254,653
49,669
158,854
15.0
63,761
293,274
43,827
199,049
15.0
6,777
116,627
123,404
6,449
93,387
99,836
7,463
170,509
177,972
9,225
151,551
160,776
9,459
106,365
115,825
190
1,680,491
1,680,681
120,480
1,801,161
70.0
0
2,079,056
2,079,056
135,924
2,214,980
73.2
0
2,379,226
2,379,226
145,707
2,524,932
69.0
0
2,276,247
2,276,247
142,268
2,418,515
72.0
0
2,722,452
2,722,452
128,439
2,850,891
73.0
173,788
77
415,016
140,453
729,334
28.3
563,552
42,386
61,809
3,624,387
61,051
177,860
77
411,691
165,598
755,227
25.0
195,096
6,423
72,560
3,884,057
53,916
174,425
166,260
184,250
76
76
76
655,921
539,777
598,507
235,330
186,058
287,226
1,065,753
892,171 1,070,059
29.0
27.0
27.0
211,141
204,508
251,006
8,144
7,866
16,300
127,031
120,447
198,876
4,785,167 4,317,075 5,102,867
78,095
45,536
45,375
Source: State Bank of Pakistan
Note : Effective 22 July 2006, demand & time deposits have been re-classified in accordance with BSD circular no. 9 2006 dated 18 July 2006. the time
deposits of less than 6 months are included in demand deposits for for the prupose of CRR & SLR
- Definition of time & demand liabilites as mentioned in BSD circular no 9 dated 18 July 2008 have been revised. As per new definition, time liabilities will
included deposits with tenor of one year nad above. Accordingly, time deposits with tenor of less of than one year will become part of demand deposits.
TABLE 5.4
INCOME VELOCITY OF MONEY
End June Stock
Naroow Money
M1
Monetary Assets (M2)
(Rs million)
Growth
Percentage
(Rs billion)
Income Velocity of Monetary
Assets (M2)
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
73.56
80.93
96.54
103.45
118.97
134.83
159.63
185.08
206.36
240.16
265.14
302.91
327.82
358.77
423.14
448.01
443.55
480.33
643.04
739.03
104.62
116.51
146.03
163.27
183.91
211.11
240.02
269.51
290.46
341.25
400.64
505.57
595.39
703.40
824.73
938.68
1,053.23
1,206.32
1,280.55
1,400.63
13.2
11.4
25.3
11.8
12.6
14.8
13.7
12.3
7.8
17.5
17.4
26.2
17.8
18.1
17.2
13.8
12.2
14.5
6.2
9.4
2.7
2.7
2.7
2.7
2.7
2.6
2.5
2.6
2.7
2.7
2.7
2.7
2.3
2.4
2.4
2.4
2.5
2.3
2.4
2.7
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
End March
2006-07
2007-08
P:Provisonal
Explanatory Note:
1275.6
1494.14
1797.36
2174.74
2512.21
2720.68
3155.63
1,526.04
1,751.88
2,078.48
2,485.49
2,960.64
3,406.91
4,065.16
9.0
14.8
18.6
19.6
19.1
15.1
19.3
2.6
2.5
2.3
2.3
2.4
2.1
2.0
3,788.70
4,408.09
11.2
8.4
Source: State Bank of Pakistan
a: It may be noted that data series of M1 from 2000-01 is not comparable as compilation of M1 based on weekly data has been
discontinued by the SBP. Now M1 is being compiled on the basis of monthly returns and will be reported in the monthly statistical
Bulletin of the SBP beginning from April 2008 in its table 2.1
b: The stock data of M2 has been revised since June 2002 due to treatment of privatization commission deposits with NBP as
government deposits. These deposits were previously uncluded in private sector deposits which have now being included in
government deposits.
TABLE 5.5
LIST OF DOMESTIC, FOREIGN BANKS AND DFIs (As on 30-04-2008)
Public Sector Commercial Banks
1 First Women Bank Ltd.
2 National Bank of Pakistan
3 The Bank of Khyber
4 The Bank of Punjab
Specialized Scheduled Banks
1 Industrial Development Bank of Pakistan
2 The Punjab Provincial Co-operative Bank
3 SME Bank Limited
4 Zarai Taraqiati Bank Limited
Private Local Banks
1 Allied Bank Limited
2 Askari Bank Limited
3 Bank Al Falah Limited
4 Bank Al Habib Limited
5 My Bank Limited
6 Creacent Commercial Bank Limited
7 NIB Bank Limited
8 Faysal Bank Limited
9 Habib Bank Limited
10 KASB Bank Limited
11 MCB Bank Limited
12 Meezan Bank Limited
13 Atlas Bank Limited
14 Saudi Pak Commercial Bank Limited
15 Soneri Bank Limited
16 United Bank Limited
17 Arif Habib Bank Limited
18 Dubai Islamic Bank Pakistan Limited
19 Bank Islami Pakistan Limited
20
21
22
23
24
25
ABN AMRO Bank Pakistan Limited
Habib Metropolitan Bank Limited
JS Bank Limited
Standard Chartered Bank (Pakistan) Limited
Emirates Global Islamic Bank
Dawood Islamic Bank Limited
Foreign Banks
1
Al-Baraka Islamic Bank B.S.C. (E.C.)
2
Citibank N.A.
3
Deutshe Bank A.G.
4
The Hong Kong & Shanghai Banking Corporation Limited
5
Oman International Bank S.A.O.G.
6
The Bank of Tokyo - Mitsubishi UFJ Limited\
Development Financial Institutions
1
House Building Finance Corporation
2
Investment Corporation of Pakistan
3
Pak Kuwait Investment Company of Pakistan (Pvt) Limited
4
Pak Labya Holding Company (Pvt) Limited
5
Pak Oman Investment Company (Pvt) Limited
6
Pakistan Industrial Credit & Investment Corp. Ltd.
7
Saudi Pak Industrial & Agricultural Investment company
(Pvt) Limited
Micro Finance Banks
1
Khushhali Bank
2
Network Micro Finance Bank Limited
3
The First Micro Finance Bank Limited
4
Rozgar Micro Finance Bank Limited
5
Tameer Micro Finance Bank Limited
6
Pak Oman Micro Finance Bank Limited
Source: State Bank of Pakistan
and Finance Division.
TABLE 5.6
SCHEDULED BANKS IN PAKISTAN (Weighted Average Rates of Return on Advances)
(Percent)
As at the
Precious
End of
Metal
I. INTEREST BEARING
1999
Jun
13.39
(15.57)
Dec
11.41
(16.50)
2000
Jun
11.10
(11.81)
Dec
11.53
(12.73)
2001
Jun
11.75
(13.87)
2002
Jun
8.10
(8.14)
2003
Jun
12.01
(12.01)
2004
Jun
9.20
(9.20)
2005
Jun
8.51
(8.51)
2006
Jun
11.58
(11.58)
2007
Jun
10.87
(10.87)
Dec
11.45
(11.45)
II. ISLAMIC MODES OF FINANCING
1999
Jun
11.27
(10.01)
Dec
10.91
(16.28)
2000
Jun
10.61
(11.10)
Dec
11.24
(11.32)
2001
Jun
11.02
(11.28)
2002
Jun
9.30
(9.50)
2003
Jun
11.43
(11.43)
2004
Jun
10.86
(10.86)
2005
Jun
9.03
(9.03)
2006
Jun
10.66
(10.66)
2007
Jun
12.04
(12.04)
Dec
9.70
(9.70)
Stock
Exchange
Securities
Merchandise
Machinery
Real
Estate
Financial
Obligations
Others
Total
Advances*
14.15
(14.16)
13.79
(13.44)
13.76
(13.45)
13.57
(12.82)
13.54
(14.06)
11.27
(11.70)
11.97
(11.82)
6.01
(6.01)
6.86
(8.29)
14.84
(14.09)
11.37
(12.11)
10.36
(10.42)
13.89
(13.91)
14.56
(14.35)
13.67
(13.83)
12.88
(13.68)
13.69
(13.59)
13.12
(13.13)
9.39
(9.67)
6.89
(7.08)
6.09
(6.01)
8.68
(8.51)
10.73
(10.68)
9.82
(9.82)
15.19
(15.18)
14.17
(14.30)
13.15
(13.15)
13.82
(13.74)
13.50
(13.55)
13.56
(13.67)
15.66
(15.68)
11.21
(11.77)
4.59
(4.07)
8.55
(8.55)
11.07
(11.06)
11.09
(11.09)
14.08
(14.49)
13.75
(14.78)
12.23
(13.73)
12.90
(13.62)
12.84
(13.86)
12.72
(12.98)
12.63
(12.86)
9.08
(9.08)
6.68
(6.68)
10.23
(10.23)
12.30
(12.30)
12.85
(12.85)
14.95
(15.13)
13.14
(13.25)
13.65
(14.03)
13.49
(13.56)
13.07
(13.00)
13.88
(13.81)
7.74
(7.66)
7.08
(7.03)
6.76
(6.70)
10.31
(10.31)
11.05
(11.05)
10.02
(10.02)
14.29
(16.11)
14.07
(16.29)
13.34
(13.98)
12.93
(13.36)
12.05
(13.87)
12.47
(13.39)
10.66
(11.49)
9.04
(9.05)
8.86
(9.02)
9.59
(9.99)
10.76
(10.81)
11.93
(11.98)
14.47
(14.88)
14.09
(14.75)
13.25
(13.77)
13.08
(13.58)
13.07
(13.64)
13.00
(13.29)
11.87
(12.35)
8.41
(8.54)
7.01
(7.01)
9.71
(9.66)
11.25
(11.30)
11.64
(11.66)
15.69
(15.39)
14.42
(14.51)
13.12
(13.48)
13.51
(13.68)
13.47
(13.57)
13.09
(13.33)
5.92
(5.77)
4.86
(5.28)
7.15
(7.17)
10.03
(10.20)
11.26
(11.34)
11.27
(11.41)
15.12
(15.03)
14.82
(14.68)
13.48
(14.07)
13.54
14.01
13.39
(13.88)
12.85
(12.73)
7.50
(7.95)
5.73
(5.96)
7.93
(7.95)
9.63
(9.66)
10.11
(10.03)
10.26
(10.23)
15.75
(15.92)
15.41
(15.45)
14.31
(14.39)
14.48
(14.53)
14.53
(14.42)
13.70
(13.81)
9.39
(9.54)
6.61
(6.81)
7.80
(7.88)
9.14
(9.20)
10.80
(10.84)
10.76
(10.82)
13.76
(14.92)
13.57
(14.84)
13.08
(14.39)
12.97
(14.24)
13.31
(14.52)
13.47
(14.05)
11.47
(12.08)
9.27
(9.68)
10.16
(10.22)
11.23
(11.26)
11.92
(11.92)
11.80
(11.79)
14.49
(14.57)
13.89
(13.86)
13.42
(13.40)
13.15
(13.09)
13.84
(13.86)
13.32
(13.22)
7.79
(8.62)
5.88
(5.82)
8.21
(8.19)
9.25
(9.25)
10.43
(10.49)
10.58
(10.62)
15.00
(15.87)
14.74
(15.82)
13.83
(14.94)
14.07
(15.09)
14.03
(14.78)
13.32
(14.00)
10.31
(10.84)
8.34
(9.01)
10.15
(10.67)
12.37
(12.90)
13.02
(13.40)
12.93
(13.26)
14.82
(15.23)
14.49
(14.96)
13.54
(14.27)
13.59
(14.24)
13.65
(14.24)
13.20
(13.52)
9.19
(9.71)
7.19
(7.60)
8.94
(9.13)
10.68
(10.83)
11.57
(11.68)
11.55
(11.65)
Source: State Bank of Pakistan
* Weighted average rates shown in parentheses represent Private Sector.
TABLE 5.7
SALE OF GOVERNMENT SECURITIES THROUGH AUCTION
(Rs Million)
Fiscal Year/
Securities
1993-94
MARKET TREASURY BILLS*
A. Three Months Maturity
Amount Offered
í) Face Value
íi) Discounted Value
Amount Accepted
í) Face Value
íi) Discounted Value
Weighted Average Yield Accepted
í) Minimum % p.a.
íi) Maximum % p.a.
B. Six Months Maturity
Amount Offered
í) Face Value
íi) Discounted Value
Amount Accepted
í) Face Value
íi) Discounted Value
Weighted Average Yield Accepted
í) Minimum % p.a.
íi) Maximum % p.a.
C. Twelve Months Maturity
Amount Offered
í) Face Value
íi) Discounted Value
Amount Accepted
í) Face Value
íi) Discounted Value
Weighted Average Yield Accepted
í) Minimum % p.a.
íi) Maximum % p.a.
2 Pakistan Investment Bonds(PIBs)**
A. Amount Offered
03 Years Maturities
05 Years Maturities
10 Years Maturities
B. Amount Accepted
a) 3 Years Maturities
i) Amount Acepted(Face Val
ii) Weighted average Yield #
a) Minimum % p.a.
b) Maximum % p.a.
b) 5 Years Maturities
i) Amount Acepted(Face Val
ii) Weighted average Yield #
a) Minimum % p.a.
b) Maximum % p.a.
c) 10 Years Maturities
i) Amount Acepted(Face Val
ii) Weighted average Yield #
a) Minimum % p.a.
b) Maximum % p.a.
Note
*: MTBs was introduced in 1998-99
**: PIBs was introduced in 2000-01
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
-
-
-
-
147,735
143,719
82,245
80,670
107,720
105,147
-
-
-
-
45,985
44,893
21,085
20,725
72,720
70,984
-
-
-
-
6.660
14.616
6.931
8.958
6.849
12.221
-
-
-
-
343,937
322,564
205,980
197,165
115,753
109,916
-
-
-
-
102,669
96,161
85,515
81,909
69,538
66,066
-
-
-
-
10.599
15.740
7.092
10.355
7.138
12.876
-
-
-
-
283,038
247,934
181,014
164,416
75,122
67,584
-
-
-
-
78,960
69,148
51,200
46,514
54,017
48,431
-
-
-
-
10.098
16.000
7.584
10.871
7.777
12.935
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12.427
12.486
-
-
-
-
-
-
5,317
-
-
-
-
-
-
12.946
13.000
-
-
-
-
-
-
36,129
-
-
-
-
-
-
13.955
14.004
(Contd.)
58,814
8,534
6,674
43,606
46,123
4677
Table 5.7
SALE OF GOVERNMENT SECURITIES THROUGH AUCTION
No.
1
A
B
C
Note
Securities
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
(Rs. million)
July-March
2007-08
Market Treasury Bills
Three Month Maturity
Amount Offered
i) Face value
ii) Discounted value
128,358
125,693
109,106
108,332
216,637
214,315
1,011,659
1,002,708
389,173
382,026
186,652
183,039
49,625
48,596
Amount Accepted
i) Face value
ii) Discounted value
72,862
71,429
29,231
29,042
115,575
115,174
724,359
716,768
210,541
206,768
136,102
133,484
45,225
44,288
Weighted Average Yield
i) Minimum % p.a.
ii) Maximum % p.a.
5.362
12.150
1.658
5.815
0.995
1.702
2.017
7.479
7.549
8.326
8.315
8.689
8.687
9.548
Six Month Maturity
Amount Offered
i) Face value
ii) Discounted value
287,853
276,882
747,018
731,354
328,990
326,114
470,885
460,185
182,112
173,289
125,483
120,197
64,325
61,426
Amount Accepted
i) Face value
ii) Discounted value
163,665
157,934
349,009
341,225
158,430
157,256
256,914
251,166
69,752
67,094
90,433
86,629
56,395
53,867
Weighted Average Yield
i) Minimum % p.a.
ii) Maximum % p.a.
5.645
12.555
1.639
12.404
1.212
2.076
2.523
7.945
7.968
8.487
8.485
8.902
8.902
9.822
Twelve Month Maturity
Amount Offered
i) Face value
ii) Discounted value
202,984
187,339
695,425
665,337
476,719
466,729
136,713
128,569
555,757
509,202
787,636
717,951
568,790
516,955
Amount Accepted
i) Face value
ii) Discounted value
84,568
78,444
264,938
253,908
241,019
236,421
70,688
65,799
459,440
422,647
661,786
607,211
393,605
359,740
Weighted Average Yield
i) Minimum % p.a.
ii) Maximum % p.a.
6.383
11.984
2.356
6.941
1.396
2.187
2.691
8.401
8.456
8.791
8.786
9.160
9.159
10.124
(Contd.)
*: MTBs was introduced in 1998-99
**: PIBs was introduced in 2000-01
Table 5.7
SALE OF GOVERNMENT SECURITIES THROUGH AUCTION
(Rs. in million)
No.
Securities
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
July-March
2007-08
2
Pakistan Investment Bond
A.
Amount Offered
03 Years Maturity
05 Years Maturity
10 Years Maturity
15 Years Maturity
20 Years Maturity
30 Years Maturity
238,360
46,124
47,346
144,890
-
211,963
26,074
45,620
140,268
-
221,291
38,514
58,840
93,041
14,316
16,579
-
8,016
2,400
2,603
3,013
0
0
-
16,012
3,896
6,526
5,590
0
0
-
199017
36982
39799
65986
12750
20200
23300
133,052
11,044
21,177
58,805
14,876
9,550
17600
B.
Amount Accepted
107,695
74,848
107,658
771
10,161
87867
68,818
24,819
9,651
14,533
100
2,846
10882
4,953
8.356
12.475
1.792
7.952
3.734
4.235
0.000
0.000
9.158
9.389
9.311
9.778
9.619
10.604
24,382
14,369
27,765
427
4,075
10174
10,777
9.392
12.994
3.119
8.887
4.867
5.270
0.000
0.000
9.420
9.646
9.528
10.002
9.796
10.800
58,194
50,828
51,606
244
3,240
30211
23,038
10.420
13.981
4.014
9.587
6.168
7.127
0.000
0.000
9.8005
9.8454
10.106
10.507
10.179
11.434
-
-
6,996
0
-
9250
7,801
-
-
7.683
8.994
0.000
0.000
-
10.85
11.058
11.103
11.868
(a) 03 Years Maturity.
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
(a) 05 Years Maturity.
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
(a) 10 Years Maturity.
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
(a) 15 Years Maturity. *
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
Note
(a) 20 Years Maturity. *
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
-
-
6,757
0
-
11250
7,850
-
-
8.706
8.993
0.000
0.000
-
11.173
11.392
11.375
11.998
(a) 30 Years Maturity.
(i) Amount Accepted
(ii) Weighted Average Yield #
(1) Minimum % p.a.
(2) Maximum % p.a.
16100
14400
-
-
-
-
-
11.546
11.680
11.588
12.239
*: MTBs was introduced in 1998-99
**: PIBs was introduced in 2000-01